Brussels, 04/03/2011 (Agence Europe) - A week ahead of the eurozone summit convened to examine how to deal with the eurozone sovereign debt crisis, there has been a flood of alternatives to the Franco-German idea of a competitiveness pact, recently adjusted by President of the European Council Herman Van Rompuy and President of the European Commission José Manuel Durão Barroso (see EUROPE 10327). The Liberals have come up with a “Community Act for Economic Governance and Convergence in the Union” and at their meeting in Athens on Friday, the European Socialists proposed a “Competitiveness and Jobs Pact”.
The head of the Liberal Group at the European Parliament, Belgium's Guy Verhofstadt, is still on the warpath. Since the 4 February European Council, he has been constantly attacking the intergovernmental nature of the Franco-German competitiveness pact (see EUROPE 10311 and 10312). He says the Community method is the only one that has come up with the goods, with the European Commission initiating moves, monitoring progress and having the power to issue sanctions against member states not toeing the line. The Liberals recommend a “Convergence Code” of areas of activity where the Commission would set out minimum and maximum levels of standards and targets that the member states would have to implement over a given period. Key areas for greater convergence among national economies include pay (pay rises must be kept down and match productivity), pensions systems (taking account not only of the retirement age itself but also the number of years of work and the amount paid towards retirement), worker mobility and protection, taxation (harmonising the common consolidated tax base for corporate tax, increasing taxes on consumption and decreasing income tax), along with investment in research and infrastructure. Other measures should be taken at EU level to extend the single market and stabilise the financial industry (like recapitalising banks, introducing credible stress tests and setting up a financial crisis management system).
Verhofstadt, the former Belgian prime minister, calls for the six areas of draft legislation on economic governance to be boosted by introducing genuine automatic follow-on in decision-making and the setting up of a eurobond market.
Socialist proposals. The head of the European Socialist Group, Poul Nyrup Rasmussen, explains in a press release that the European Socialists are calling for a progressive economic strategy for Europe, focused on investment innovation, green growth, education, tackling social inequality and a tax on financial transactions, along with budget consolidation. A document prepared by the French Socialists will be submitted to their European counterparts at the meeting in Athens. It recommends measures like introducing an infrastructure investment plan funded by eurobonds and taxes on financial transactions, introducing a minimum wage (which would vary from member state to member state), dealing with future-looking expenditure like investment in education and research differently when it comes to calculating debt in connection with the Stability and Growth Pact, preserving social dialogue rules and putting social, environmental and trade standards on the same footing.
According to an impact study on the Socialists' “Competitiveness and Jobs Pact” carried out by the Copenhagen-based economic council for the labour movement, the EU economy would grow by 10.9% and create 8 million jobs by 2015 while reducing deficits by the same extent as would be possible under the Franco-German competitiveness pact. Over the next five years, the Franco-German deal would only lead to 6.4% growth, however, and would cause the loss of 600,000 jobs. Rasmussen, the former Danish prime minister, criticised the Conservatives' austerity programme of being based on low pay, lack of job security, making people work longer hours and preventing the emergence of new forms of finance. He accused the European Commission of backing the Conservative majority in its Annual Growth Review (see EUROPE 10292).
EPP in Helsinki. At the same time as the Socialists were holding their summit, the leaders of the European People's Party were meeting in Helsinki on Friday evening, along with Van Rompuy and Barroso. Earlier in the day, German Chancellor Angela Merkel had said that a lot of work still needed to be done if the EU were to fully respond to the eurozone debt crisis and send a strong message to the money markets. She was speaking after a meeting with the prime minister of Luxembourg (and chair of the Eurogroup), Jean-Claude Juncker.
Along with the competitiveness pact, this response to the crisis should include agreement on the draft economic governance legislation, increasing the clout and powers of the European bailout fund (the EFSF) and complete preparations for the European Stability Mechanism, which will have a €500 billion lending capacity and replace the temporary funds in the summer of 2013.
The EPP pre-summit meeting provided an opportunity for the new prime minister of Ireland, Enda Kenny, to repeat his call for less stringent conditions attached to the international financial aid package granted to his country at the end of last year. Ireland describes the 5.8% interest rate on its loans as punitive.
Parliamentary warning. A group of MEPs from the main political groups underlined the role that the European Parliament intends to play in the negotiations on the economic governance legislative package. “The discussions on a potential competitiveness pact between the president of the European Council and the president of the Commission clearly overlap with the economic governance package, mainly with the new macro-economic imbalances procedure”, they write in a joint statement. The European Parliament stresses that it intends to use its powers as co-legislator to the full, they add. The statement was also signed by EPP Group MEPs (Diogo Feio of Portugal, Jean-Paul Gauzès of France, Corien Wortmann-Kool of the Netherlands), the S&D Group (Udo Bullmann of Germany, Elisa Ferreira of Portugal), the ALDE Group (Sharon Bowles of the UK, Sylvie Goulard of France, Carl Haglund of Sweden), the Greens/EFA Group (Sven Giegold of Germany, Philippe Lambert of Belgium), the ECR Group (Vicky Ford and Kay Swinburne both of the UK) and the GUE/NGL (Jürgen Klute of Germany).
A number of organisations which are active in the social sector are bringing pressure to bear on European leaders. The organisation SOLIDAR is very concerned that social policy might become the poor relation of the competitiveness pact. “Has nothing been learnt from the crisis? The harsh austerity policies currently being implemented by governments are undermining a socially sustainable recovery and resulting in the poor and disadvantaged paying the costs for the crisis that they did not cause. This orthodox approach endangers social cohesion within the EU”, says its secretary general Connie Reuter in a press release. For the president of the European Anti-Poverty Network (EAPN), Ludo Horemans, “The EU is giving out contradictory messages - how can it say on the one hand, it wants to put people at the centre of the new strategy, wants inclusive growth and to make a decisive impact on poverty when it is forcing countries to make cuts in basic services, benefits and wages?” (M.B./transl.fl/rt)